CVS and the U.S. Department of Justice are seeking to block or limit the testimony of the American Medical Association’s proposed witnesses in the CVS-Aetna merger review.
The DOJ’s New Scrutiny of Vertical Mergers
In December, CVS Health, the nation’s largest pharmacy chain, agreed to purchase Aetna, the third largest health insurance company for $69 billion. This deal represents a vertical merger, where two companies who work in similar industries want to combine.
Until recently, vertical mergers did not raise concern for regulators. However, the Department of Justice’s Antitrust Division recently filed a lawsuit against AT&T after it agreed to acquire Time Warner. The AT&T-Time Warner deal went through, but it caused uncertainty about what factors the Federal Trade Commission and the DOJ will use to evaluate similar cases.
CVS and Aetna Merger
The CVS and Aetna merger agreement came about ten months after Aetna terminated its agreement to buy its competitor, Humana, for $37 billion. A federal judge had ruled that Aetna’s purchase of Humana would violate antitrust laws.
Here, the Department of Justice challenged the CVS and Aetna deal on the grounds that the merger would harm competition in the Medicare Part D market in some locations in the United States. To settle the DOJ’s antitrust concerns, CVS and Aetna sold Aetna’s Medicare Part D business to WellCare Health Plans. Following the sale, the deal was closed in November.
Under the Tunney Act, courts have the power to review DOJ decisions. Here, federal District Court Judge Richard Leon ordered a Tunney hearing to review the parties’ consent decree. Essentially, Judge Leon is tasked with reviewing the CVS-Aetna merger. Judge Leon’s role is to examine the settlement agreement between the DOJ, CVS, and Aetna and determine whether it is in the public’s best interest.
Judge Leon has previously voiced his skepticism of the deal that CVS and Aetna struck with the DOJ. He said that the settlement only addresses “about one-tenth of 1%” of the issues with the merger.
Proposed Expert Witnesses
Judge Leon released a list of witnesses that consisted of representatives of groups that had filed amici curiae briefs against the deal, including the American Medical Association and the American Antitrust Institute.
CVS and the DOJ objected to the American Medical Association’s proposed economics and health experts, Richard Scheffler and Neeraj Sood, and antitrust legal expert, Tim Greaney. The government also objected to other witnesses proposed by the AIDS Healthcare Foundation, Consumer Action, and U.S. PIRG.
Attorneys for CVS and the Department of Justice filed motions arguing against allowing the amici curiae witnesses to testify because the testimony is likely to be outside of the bounds of the limited review of the Tunney hearing.
CVS argued that the amici curiae “have made clear they intend to use these Tunney Act proceedings as a platform to present theories of purported harm to competition that the government has not alleged — theories the government in fact rejected after a lengthy and thorough review.”